Statistics Canada data for November show the province issued the highest value of commercial building permits on record

The value of permits issued for commercial buildings in B.C. has never been higher.

New commercial permits topped $564 million in November, a 130 per cent increase over October, according to Statistics Canada. The agency reported that a $240-million permit for a new office tower in the Greater Vancouver region contributed most to the gain.

Total non-residential permits – which include commercial, institutional and industrial developments – reached nearly $742 million, a 75 per cent increase over the month before.

B.C. accounted for most of the national increase in non-residential building permit values, which rose 11.6 per cent in November to $3.3 billion.

Not all B.C. values rose.

Month to month, the value of permits for residential buildings fell 27 per cent to $893 million. The decline was driven primarily by a drop in permit values for single family dwellings, which fell 30 per cent.

Victoria, Vancouver among top national permit issuers

At the regional level, Victoria and Vancouver saw the third and fourth largest year-over-year gains for total permit values.

In Victoria, November values rose 72.6 per cent over 2017. In Vancouver, they were up 63.4 per cent.

Both regions were behind only Quebec, where values rose 177.3 per cent, and Brantford, where values increased by 158.2 per cent.

In total, Canadian municipalities issued $8.3 billion in building permits in November, up 2.6 per cent from October and 6.6 per cent over 2017.

Currently, B.C. strata corporations formed before 2010 may have a low cap on the number of rentals allowed in their building – a bylaw that some housing advocates have argued causes units to sit empty as they cannot be rented out.

To avoid this, all strata corporations formed since 2010 have not been permitted to put rental restrictions in place, which means all owners of post-2010 condos may rent out their units.

The NDP government’s Rental Housing Task Force last week issued 23 recommendations for amending the Residential Tenancy Act. Its ninth recommendation was to “increase the availability of currently empty strata units by eliminating a strata corporation's ability to ban owners from renting their own strata units” – no matter how old the building.

The task force wrote in its Recommendations and Findings, “As one online participant wrote in support of removing rental bans in strata properties, ‘Allowing stratas to ban rentals assumes that renters are hazardous, and supports vacant condos owned by speculators. Condos have become fundamental to the supply of rental housing and should not be allowed to be prohibited.’ Most Canadian provinces allow owners of strata units to rent them out and do not allow discrimination against renters.”

It added, “While the Task Force believes this change will help to increase the rental housing supply, it is also important to give strata corporations the ability to evict tenants in exceptional cases where negligence, abuse or law breaking is disrupting the quiet enjoyment of other residents, putting people in danger, or harming the building.”

Would rental free-for-all fuel speculation?

However, the Condominium Home Owners’ Association of B.C. (CHOA) is lobbying to maintain the status quo that allows strata corporations to limit rentals in their buildings.

Tony Gioventu, executive director of CHOA, told Glacier Media ahead of the task force’s recommendations that allowing all condos to be rented out at the owner’s discretion would do the opposite of the intended result to increase supply, and would fuel investor speculation.

Gioventu said that condo buildings with no rental restrictions actually tend to have a much higher rate of empty units, as a higher proportion of the homes are purchased by investors. Units in unrestricted buildings are much more attractive to investor-purchasers, as those units can be rented out at any time. However, buildings with a lot of investor-owners tend to also have a higher proportion of units sitting empty.

Gioventu cited the results of a CHOA study of 16 buildings in Greater Vancouver with 50 or more units. Eight were built after 2010, and therefore had no rental restrictions, and eight before 2010.

“The pre-2010 strata buildings with rental restrictions bylaws had the lowest proportion of empty units,” said Gioventu. He said that these buildings had vacancy rates of two per cent or lower, meaning that virtually every unit was occupied, mostly by owners or their families.

In the strata buildings built after 2010, CHOA found vacancy rates were between 20 and 35 per cent. However, Gioventu added this had less to do with the freely permitted rentals, and more to do with investors and speculators tending to buy higher proportions of post-2010 condos.

He said, “They’re empty because the owners don’t want to deal with tenants. Those are the buildings that should be targeted.”

The City of Vancouver’s empty homes tax, and the province’s speculation and vacant homes tax, were implemented recently with the aim of solving exactly that problem.

Selena Robinson, minister of municipal affairs and housing, said she will deliver the recommendations to Premier Horgan, and the ministry will spend the coming weeks considering how the recommendations might be implemented and consulting with stakeholder groups.

Investment in Canadian commercial real estate is expected to break records for a third consecutive year, led by demand in the Toronto markets and industrial sector

Commercial real estate dollar volume in the third quarter of 2018 has signified potential for another record-breaking year in investment value.

Commercial investment across the country may reach an all-time high for the third year in a row, according to new statistics by CBRE. The third quarter recorded 38.6 billion in sales year-to-date, nearly exceeding the $43 million total investment value in 2017.

“This is the third year Canadian CRE investment will have hit an all-time high in trading volumes, and it’s no secret why: Canada boasts a rapidly growing population and diverse economy, and the security of income from real estate versus other asset classes looks like a safer bet,” said Peter Senst, president of CBRE Canada, Capital Markets.

Investment value was led primarily by demand in the Toronto market and the industrial sector.

Commercial investment in Toronto accounted for $14.5 million year-to-date, followed by $4.5 million in Montreal, $3.8 billion in Calgary and $3.3 billion in Edmonton.

Industrial investment across Canada accounted for more than a quarter of all real estate transaction value at $10.1 billion year-to-date – eclipsing the total dollar volume for 2017 of $7.4 billion.

“Calgary has already doubled its 2017 industrial investment total and Edmonton has tripled its 2017 industrial investment volumes, while Halifax has seen its industrial investment increase nearly tenfold compared with 2017’s total: $215 million versus $26 million,” the press release reads.

Multi-family real estate is the second-best performing asset class, accounting for $5.5 billion in sales so far this year.

Moving forward, lack of available multi-family stock and land supply for new projects may slow further investment.

Western Investor's most-read stories, from dual-agency regulation to new and expanded residential real estate taxes

During a year of major real estate policy and regulation change, it comes as no surprise that WesternInvestor.com’s most-viewed B.C. stories gave readers the insight into these new developments, including B.C’s foreign buyer tax, restrictions on assignment sales to prevent ‘shadow flipping’ and ‘ double-ending’. Readers also frequented the sight to get the lowdown on up-and-coming investment destinations.

Here is our annual countdown of our five most-read British Columbia stories published in 2018.

Our first story to garner the most views this year focuses on the economic growth of Vancouver Island town Powell River, a los-cost alternative to the mainland with a 80.3 per cent increase in housing sales year-over-year.

Changes to the B.C. Real Estate Services Act that came into effect June 15, 2018 prohibited "double ending" – representing both a buyer and a seller in a real estate transaction. In our story, real estate professionals worried it could slowdown sales – and as the year progressed, they may have had a point.

This quick-hit story on Chinese real estate portal Juwai.com and retail site JD.com teaming up to offer Canadian real estate to Asian consumers garnered the third-most views this year, showing us that readers are still drawn to stories on foreign investment in Vancouver property.

Our second-most read story of the year focused on the first effects on the housing market following the B.C. Budget 2018 housing measures announcement. Pricey markets like Vancouver’s west side were the first to fall, seeing prices down 70 per cent in April 2018 versus April 2016.

Our most-read story of the year covered the CRA’s recruitment to combating mortgage fraud together with the Canadian Mortgage and Housing Corporation, by allowing lender to have access to an applicant’s tax data. Together with numerous Bank of Canada interest rates this year, it’s no surprise that readers we’re reading and watching to see how new regulations would affect mortgage eligibility in a changing market.

According to the REMAX 2019 Housing Market Outlook, the country’s average sale prices will get a 1.7% boost, an indication that the balance has finally returned to Canada.

The report notes that markets throughout the country stabilized this year after the 2017 aberration that saw prices in markets like Toronto’s surge beyond reasonable levels. Stabilization is expected to continue through 2019, a likely consequence of interest rate hikes that are believed will increase as the year goes on.

Thirty-one percent of REMAX survey respondents don’t believe interest rates have hitherto affected their ability to afford a mortgage, but that optimism doesn’t extend beyond December. Another REMAX survey of its brokers and agents revealed 83% expect interest rates to make Canadians’ home purchases cumbersome next year.

The report also expects sale prices in Vancouver to decline 3% in 2019 because obtaining a mortgage in the Metro region is becoming well-nigh impossible.

"The drop in sales in key markets across British Columbia can be partially attributed to Canadians' increasing difficulty in getting an affordable mortgage in the region," says Elton Ash, REMAX of Western Canada’s regional executive vice president. "The situation created by the introduction of the mortgage stress test this year, as well as continually increasing interest rates, means more Canadians will be priced out of the market."

The Greater Toronto Area, on the other hand, is expected to fare better next year as REMAX predicts sale prices will rise 2%, thanks to high demand for homes priced below $1 million. Demand will be weaker for homes above $1.5m, though. According to Christopher Alexander, REMAX’s vice president and regional director for Ontario-Atlantic Region, looming rate hikes might be spurring the restraint.

“People are a little more cautious than they were in the past because interest rates are starting to rise,” he said. “Government said it would be more aggressive with interest rates and people are waiting to see how it will all shake out.”

Alexander added that Toronto remains a popular destination, which should balance out weaknesses in its market.

“It’s not surprising [November sales in the GTA] were down year-over-year, but because Toronto is such a big destination, both domestically and globally, there will be good pockets of the city that balance everything gout.”

After exhibiting relatively modest performance for most of 2018 with the advent of stricter mortgage qualification rules, Toronto is seeing a resurgence in market competition once again.

The latest numbers from the city’s real estate professionals’ association indicated that the total number of active for-sale listings in the GTA saw a 9.8% year-over-year decrease in November, down to 16,420 units.

During the same time frame, the volume of new for-sale listings in the region shrank by 26.1%.

“New listings were actually down more than sales on a year-over-year basis in November,” TREB President Garry Bhaura said, as quoted by Bloomberg.

“This suggests that, in many neighbourhoods, competition between buyers may have increased. Relatively tight market conditions over the past few months have provided the foundation for renewed price growth,” Bhaura added.

Average home sales price last month was $788,345, growing by 3.5% from the same time last year.

Meanwhile, total sales in November stood at at 6,251 completed deals, representing a 14.5% annual decline.

TREB stressed, however, that any year-over-year comparison should take into account that November 2017’s performance is “distorted” due to a large number of buyers rushing to beat the implementation of B-20 in January 2018.

New light industrial/office strata projects springing up from Mount Pleasant to East Vancouver may have tapped into a profitable path, despite per-square-foot prices ranging from $800 to $1,000.

The most recent manifestations include a four-storey project on Yukon Street at West 6th Avenue – formerly the 3 Vets outdoor store – by Chard Development, which bought the site last year for $20.4 million.

Now under development, the 49,000-square-foot Yukon project will feature a high-ceiling ground floor for light industrial, with bay access for trucks, capped by three floors of stylish office space.

Chard recognized a demand for smaller office sizes from the area’s tech, finance and retail services industries. As a result, Yukon will feature smaller unit sizes (1,000 to 5,000 square feet) to adapt to this new Vancouver real estate reality, according to Byron Chard, Chard’s principal and CFO.

A similar Chard project at 34 West 7th Avenue sold out all 48,000 square feet while still under construction.

Nothing has pre-sold yet at the Yukon, where strata space starts at $1,000 per square foot.

The building will include a freight elevator, bike lockers, showers and 83 parking stalls, and it could prove popular, according to the type of high-tech tenant Chard is targeting. Completion is expected in 2020.

“I can definitely see the demand,” said Dogu Taskiran, a partner and founder at Stambol Studios, a virtual-reality startup that concentrates on the real estate market.

Taskiran said the Mount Pleasant location and ample parking would be among the draws.

Stambol is currently splitting 2,000 square feet of space in False Creek Flats, where the total monthly rent is $3,000, which Taskiran described as “a very good deal, very cheap.”

Chard noted that a startup could buy office or industrial space at Yukon and lease out part of it until it expands, but he expects most of the buyers will be sole owner-occupiers.

“Our goal is to make the space as flexible as possible,” he said.

Alliance Partners is trying the same concept in East Vancouver with a five-storey, 55,000-square-foot light industrial/office strata project on Clark Drive at Adanac Street.

Kevin Kassautzki, vice-president at Avison Young, which is handling sales of the project, expects per-square-foot prices to be in the $700 range for industrial space and $800 for offices.

“I think this area is on its way to becoming the next Mount Pleasant,” Kassautzki said.

There is an appetite for buying strata office space from larger players in the tech community, Taskiran said, but he added that Stambol and other startups often prefer to lease. A common theme, he said, is to stay out of the downtown, where higher lease rates and a lack of parking are considered obstacles.

With Kitimat getting a $40 billion LNG windfall, the town’s biggest new residential project Riverbrook Estates is the perfect way to get in on the action

Kitimat. Until recently, that name conjured up a little-known town with a population of less than 9,000 in north-west British Columbia. But today, Kitimat is a town known around the globe for one thing: the single largest private-sector investment in Canadian history.

With the announcement of LNG Canada’s $40 billion project, everyone is looking to get in on the action, whether they’re an energy worker, a contracting company, a product supplier, a facilities service companies, a land developer or an individual real estate investor. The opportunity is enormous for many – and a real challenge for others trying to find a way in.

Jason Pender, a real estate developer, investor and principal of JV Dev Group, and his development partner, Leonard Kerkhoff of Kerkhoff Construction Ltd., are two local players who stand to reap the benefits from the LNG deal. Having made a land purchase in Kitimat four years ago, they are confident that it will now pay dividends – not only to their development group, but also to those who buy into their new residential community, Riverbrook Estates.

“The lights went out”

In 2014, a development group comprising Kerkhoff Construction, JV Dev Group and three other partners purchased a 27-acre parcel of land in downtown Kitimat, when the LNG deal was first on the table.

Pender tells Western Investor, “Things were going great. Then in 2015, the natural resource sector took a huge global downturn. LNG in Kitimat took a pause and, in 2016, the front runner, LNG Canada, announced they would delay a decision indefinitely. All the lights went out.”

The group’s land parcel had achieved a lot before those lights went out. Some of their 27 acres had been rezoned into two phases of new townhomes of 93 units in total, and the development group had passed third reading on a 70- lot bare land strata site. There were an additional 32 single-family lots, with the potential to rezone half into two multi-family sites, for up to another 100 units. At close to 300 units, Riverbrook Estates was set to be the largest residential development in Kitimat in 50 or 60 years.

Then, in early October 2018, LNG Canada was approved, and, as Pender puts it, “The lights went back on. We had already accomplished a lot of ground work at Riverbrook Estates. We were ready to go then and we are ready to go now. Riverbrook Estates is significantly further ahead of any other residential development project in Kitimat.”

“Not since the gold rush”

Leonard Kerkhoff, President of Kerkhoff Construction, is extremely confident about Kitimat’s prospects. He says, “This town is about to go through unprecedented economic growth, the likes of which has not been seen since the gold rush of the mid-1800s. Kitimat is the centre of an LNG energy industry well regarded for its lesser impact on the climate, and used the world over, which is just now making headway in Canada.”

The LNG Canada project is set to bring a potential $18 billion of construction work to the town of Kitimat alone. The town’s population, last pegged at 8,131 (2016 Census), is expected to triple in the coming years as skilled workforces and management teams move in. In addition, three other LNG facilities are also under development, aiming to ride in on LNG Canada’s coattails. This includes Chevron’s proposed facility, which – if approved – could bring a further decade of development in the LNG industry to Kitimat.

Baxter Landing by Kerkhoff Construction is a 36-unit townhome development in Kitimat, the first multi-family project in the city in decades. Image supplied

“Explosive housing demand”

Since October, Kerkhoff has been in discussions with major contracting and engineering firms, such as Fluor, Ledcor, Graham, Stuart Olson, Seaspan and Mammoet, about the pressing need for rental housing in Kitimat for their management staff. With a new workforce of 7,000-10,000 workers, if even only 10 per cent require permanent homes, this represents a demand for 700 to 1,000 new homes, says Pender. He points out, “The management staff for the largest energy contract in Canadian history cannot be expected to live in a work camp.” And those estimates do not factor in new homes needed for the likely increase in support workers such as retail and hospitality staff, medical support workers and ancillary services companies.

A 50-year-old construction company, Kerkhoff Construction has been building in the region for more than five years, and has become the largest residential developer in Kitimat. Completed projects include Baxter Landing, a 36-unit townhome project, and a 49-unit condo building at Haisla Town Centre for the Haisla Nation.

Kerkhoff Construction was selected to build a 49-unit condo building at Haisla Town Centre for the Haisla First Nation. Image supplied

These are the first and only multifamily projects to be built in Kitimat in 50 years. “These projects have brought much-needed new homes into Kitimat to replace the aging homes built by Alcan in the 1950s and 60s, many of which are reaching the end of their life,” says Pender.

He adds, “Kerkhoff Construction is definitely the best positioned and furthest ahead of any other developer-builder to deliver new homes for the explosive demand Kitimat will require in the near future.”

“The timing is exceptional”

With Riverbrook Estate’s first phase of 47 new townhomes coming to the pre-sale market at the end of November 2018, and occupancy expected in spring 2020, now is the time for investors to get a piece of the action, says Pender.

“We believe the timing is exceptional, as LNG construction will be ramping up and in full swing and housing needs will be at an all-time high. Whether you’re an investor looking for price appreciation and cash flow, or you are looking for a new home to live in for the next decade of economic growth in this region, these are exciting times as a developer and for those buying an investment to live in or rent out.”